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TMI Blog2015 (7) TMI 597X X X X Extracts X X X X X X X X Extracts X X X X ..... n record after examining the parties to whom the sales were made by the assessee to show that the assessee has under invoiced the sale of diamonds or that the sales invoiced do not reflect the correct sale-price of the diamond. Thus A.O. as well as the CIT (A) were not justified in disallowing the loss of ₹ 1,36,62,888/- to the assessee. - Decided in favour of assessee. Addition under section 50C - A.O. made an addition on the ground that the assessee sold property during the year and the sale proceeds was shown at ₹ 55,000/-. A.O. observe that the assessee did not submit copy of saledeed and therefore, he made a reverse calculation by taking the percentage of Stamp Duty at 4.9% as based in sale as per Stamp Valuation Authority and arrived at the value of ₹ 3,38,755/- and thereby made addition for difference amount of ₹ 2,83,775/- - Held that:- We find that the contention of the assessee was that no show cause notice was issued to the assessee and therefore, the assessee was prevented from explaining its case before the A.O. It was the argument that there was violation of principle of natural justice by the A.O. and hence the addition made by the A.O. and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observed that in assessee s own case in Assessment Year 2007-08 similar loss of ₹ 6,36,72,996/- on turnover of ₹ 11,72,77,128/- was disallowed and no appeal was filed against the said assessment order. He observed that in theassessment proceedings of A.Y. 2007-08 even the statement of one of the partners Shri Parsottambhai R. Dhami was also recorded. He was asked whether there were any compelling reasons like labour problem, medical problem, financial problem or any other problem which led him to sale the diamond @ 50% of the cost price. He denied of the existence of such extreme situation. The CIT (A) further observed that during the course of appeal proceedings the A.R. of the assessee submitted not preferring appeal for A.Y. 2007-08 though on the same issue addition was made cannot be the reason. CIT (A) observed that the he was fully agreed with regard to the following the decision of the previous year for making addition but he was not inclined with A.R s view so far as additions made are concerned, he on the basis of other facts mentioned that reasons like non satisfactory explanation, no documentary evidence and partner s statement are sufficient and valid ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jection of the book results under Section 145(2) of the Act and estimation of the G.P. 7. He further relied on the decision of this Bench of the Tribunal in the case of I.T.O. vs. M/s. B. Sureshkumar Co., in ITA No.2632/Ahd/2003 for A.Y. 2000-01 order dt. 19-12-2007wherein the Tribunal has held as under:- 4. We have considered the rival submissions and the facts and circumstances of the case. After careful consideration of the totality of the facts and circumstances of the case, we are of the opinion that the assessee having furnished the quantity-wise and rate-wise details of closing stock of finished diamonds, there was no question for the Assessing Officer to arrive at the conclusion that the assessee inflated the value of cost price without bringing any evidence to show that the rate adopted by the assessee for every quality of diamond was more that the cost price or the market price. Simply, relying on one sale bill without verifying the quality of diamond sold under that bill, in our opinion, was not the right course to arrive at the conclusion that the assessee had inflated its closing stock. The fact that the assessee had sold 175.18 carat of diamonds @ ₹ 14,70 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds shown by the assessee at ₹ 16,25,60,000/- was incorrect or the method of valuation consistently adopted and followed by the assessee was incorrect. In the absence of any material to show that the actual value of closing stock possessed by the assessee as on 31-3-2004, was more than the value swn by the assessee. In our considered opinion, the A.O. was not justified in making trading addition of ₹ 53,07,218/-. Further, it is observed that none of the lower authorities have found that the various expenses claimed by the assessee in its P L A/c werenot supported by vouchers or not verifiable or were not genuine. In the above circumstances, the Ld. CIT (A) was not justified in rejecting various expenses disclosed by the assessee s day-to-day maintained books of account. Further, in business, profit is a result of various dynamics. The result of two different businessmen doing the business in the same line may defer greatly because of various reasons for e.g. the value of plant and machinery employed in the business, the ratio of own capital verses borrowed capital employed in the business, time devoted by the owner of the business, risk taking capacity of the owner, et ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be grouped together so as to find common value for the group of diamonds. As per the valuation report obtained from approved valuer, he has bifurcated the valuation in 31 groups having different rates. As contended this is the usual practice in the Industry and which the assessee follows. This contention is not found to be incorrect. 10. He further relied on the decision of this Bench of the Tribunal in the case of ACIT vs. M/s. D. Nitin Co., in ITA No.4008/Ahd/2008 for A.Y. 2005-06 order dt. 9-9-2011 wherein the Tribunal has held as under:- 5. We have carefully considered the arguments of both the sides and perused the material placed before us. We find that the A.O. has rejected the assessee s books of accounts mainly on the ground that the assessee has maintained the quality-wise quantitative details which he failed to produce before the A.O. From the perusal of the assessment order, it is evident that such finding of the A.O. is based purely on presumption. The assessee s counsel has made a statement at the time of hearing before us that the assessee has maintained the quantitative details of the rough diamonds as well as polished diamonds, but the quality wise quant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the lower authorities and material available on record. In the instant case the assessee sold diamond out of its opening stock broughtforward from earlier years costing ₹ 3,76,70,953/- for ₹ 2,40,08,065/- and claimed loss of ₹ 1,36,62,888/-. The A.O.observed that the assessee has not maintained quality-wise details of diamonds. The assessee could not explain the reasons for incurring of the loss on sale of diamonds. In the immediately preceeding Assessment Year 2007-08 loss claimed by the assessee of ₹ 6,36,74,996/- on turnover of ₹ 11,72,77,128/- on account of sale out of stock lying with it was disallowed and the assessee accepted the same and did not file any appeal there against to any higher authority. Therefore he disallowed the loss of ₹ 1,36,62,888/-. 17. On appeal, the CIT (A) confirmed the order of the A.O. by observing that no satisfactory explanation for the loss was given by the assessee and no documentary evidence was also filed for the same. The contention of the assessee is that not preferring an appeal in A.Y. 2007-08 against the disallowance of claim of loss cannot be a ground for making disallowance in the year under appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailable to the A.O. by filing copy of the bills for sale of diamond and the Revenue did not bring any material on record to show that the rough diamonds of 1240.10 kts was not sold on 4-4-2005 for ₹ 18,40,177/- and the same in fact was sold at a higher value. We therefore, set aside the orders of the lower authorities and direct the A.O. to allow the loss of ₹ 1,36,62,888/- on sale of diamonds claimed by the assessee. GroundNo.2 of the appeal is that CIT (A) has erred in confirming the addition of ₹ 2,83,775/- under section 50C of the Act. 19. The brief facts of the case are that the assessee sold a property during the year under consideration and the sale proceeds of capital gain was taken at ₹ 55,000/-. As per sale deed the value as per the Stamp Valuation Authority valued the same at ₹ 3,38,775/-. Hence the A.O. invoking the provisions of Sec. 50C adopted the sale value as per Stamp Valuation Authority and accordingly made the additional difference at ₹ 2,83,775/-. 20. On appeal, the CIT (A) held that the A.O. had rightly adopted the sale value as per provisions of Section 50C of the Act. As the assessee did not submit the sale-deed d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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